Buying again, 3 years after foreclosure
'Boomerang buyers' are returning to the housing market, getting new mortgages 3 years after foreclosures or short sales.
The "boomerang buyers" are back in the housing market.
We’re not referring to those young people who are living in your basement and are still looking for a job. We’re talking about people who lost their home to foreclosure several years ago and are now able to buy again.
How long you have to wait to buy again after a foreclosure or a short sale depends on a number of factors. In general, the higher your credit score was before your financial setback, the longer it will take to recover.
But, using government-backed Federal Housing Administration and Department of Veterans Affairs mortgages, some of those who lost their home are finding they can own again in as little as three years or, in some cases, less.
The FHA loans cost more than conventional loans, but they don’t require credit scores to be as high. Plus, the FHA requires only a 3.5% down payment, compared with 20% or more with conventional lenders.
"Most of the loans that are getting done are for people who have really rebuilt their credit," Frank Donnelly, president of the Mortgage Bankers Association of Metropolitan Washington, D.C., told Reuters. "They have to prove it was something like a job loss that caused this and not chronic delinquency."
April Del Rosario and her husband paid $315,00 in 2006 for a two-bedroom condo near San Diego, even though the $2,600 mortgage payment was a stretch. After their adjustable rate rose, making the payment even higher, and Del Rosario became pregnant, they let the condo go into foreclosure in 2009.
"We were really young and stupid," she told The Wall Street Journal. "All of a sudden, our already really expensive mortgage was going to go up. I was pregnant and everything was just bad timing on our part."
Three years later, the couple, who now have a son, were approved for a $280,000 mortgage on a three-bedroom new home south of San Diego. Even paying $300 a month for mortgage insurance, their payment is still less than they paid before, about $2,400. "We're trying to be really conservative,” Del Rosario told The WSJ.
Readers who left comments on the WSJ article were split over whether they thought that people who defaulted on their loan should be able to get a mortgage again so soon. One reader wrote:
"For people, like me, who live in states still suffering from foreclosure fallout, it's hard to feel happy for these homebuyers. We bought a house in 2007 that is now worth 40% less than what we paid. Neighbors in the exact same "house-boat" as us walked away from their home in 2009, as many in our community did. According to this article, these neighbors could come right back in 2012 and re-buy their old home at its new, much lower price -- not a bad tradeoff for three years of "paying their dues." Like my husband said, "Being accountable and ethical has never cost us this much and made us look this stupid."
What do you think? How long should people have to wait after a foreclosure or short sale to get another mortgage?
This coming January will be 5 years since our official default date and we have not heard squat from the banks , as our home we left sits and rots and depreciates everything around it. We move into an overpriced rental (really no choice...cheapest one we could find for a family of 5) due to ...both our jobs are here. We are making just enough to make our essential bills, but not near enough to fix our credit. We tried everything to keep our home...every program out there denied us and mediation was a total flop! We do not even have the opportunity yet to even try to repair our credit because of where w e live and where our jobs are. Three years after foreclosure is fair, but at the rate our banks are going...we have to wait first for them to officially foreclose, which could be 5, 6, 7 or more years...and then and only then does the 3 year clock start ticking....so in all reality we could be waiting 8,9,10 years before we can officially purchase again!!! WE have more than taken the brunt of all our mistakes...financially and emotionally...this farce with the banks is just downright cruel and unjust punishment...especially after THEY were bailed out!!! Who helped us at all?!! There are millions more homes just like ours sitting out there that haven’t even hit the market yet and why....because if we made such a stink and ever forced the banks to get moving...the economy would tank again!!! But why should we have to take all the responsibility? If the banks do not officially foreclose within 2 years...they should be fined and the previous homeowner’s poor credit should be erased and restored to a 700 credit score so they could move on with their lives whether, by no fault of their own, the banks have foreclosed officially or not!!! We are STILL being manipulated by the banks and it has got to stop!!! We paid our price; whereas they were bailed out...it is their time to start paying the piper!
I think there should b forgiveness out there for ppl that want to try to rebuild their lives after such a tragic situation. If they show themselves able to purchase they deserve a second chance. Where is the bail out for the american families that the big bank etc got ??
Thinking of buying a home? There used to be one main thing to do in buying a home and that is making the contract contingent on an acceptable home inspection from a licensed Home Inspector. In addition, The new thing to do is make the purchase of a Foreclosed or Short Sale property contingent on an independent Appraisal from an Appraiser you employ. Pay the fee yourself and don’t employ the same Appraiser the lender uses. The fee should be in the $400 - $500 range but it could save you many thousands by not paying an inflated price for the home. I’ve noted many cases where homes were sold for much more than their appraised market value. (example: $180,000 for a home appraised for $150,000). You’re upside down as soon as you close. Use as much caution in buying a home as you would if you were stupid enough to text while driving. Don’t get fooled again!
Certified Residential Appraiser
Since 1983 (recently Retired)